Data & Research September 3, 2008

The Generation that Keeps on Giving

Millionaires in Generation X seem more philanthropic than their parents.

Reported by

Generation X millionaires give nearly twice as much on average to charitable causes than older generations, according to Northern Trust’s Wealth in America survey of high-net-worth individuals and families.

Gen X millionaire households (ages 28 to 42) gave nearly $20,000 in 2006, compared with Baby Boomers (ages 43 to 61) and Silent Generation millionaires (ages 62 to 77), who gave roughly $10,000, according to a release from Northern Trust. Gen X households are also more generous in their intended charitable bequests, planning to give 22% of their estate to charity, compared with 16% for Boomers and 14% for Silent Generation millionaires.

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news. 

If you make it easy to give, they will give. Nothern Trust suggested that the advance of technology could have something to do with the generosity of Gen X. “The abundance of information about nonprofit organizations that can be found on the Internet and the ease of contributing to a charitable cause, or even starting your own global giving initiative online, is a huge convenience for younger generations, who are generally more comfortable with online giving vehicles,’ said Marguerite Griffin, senior vice president and national director of Philanthropic Services for Northern Trust.

The study showed that more than half (53%) of millionaires would rather give during their lifetime versus bequest in their will, according to Northern Trust. Millionaires still plan to leave a sizeable portion of their estate to charity (about 16% on average across the board). Gen X millionaires were more motivated to accomplish family-related goals than older generations. For example, 15% of Gen X millionaires stated that creating a lasting legacy for themselves or their family was their main goal (compared with 4% of older millionaires), and 12% stated that honoring a loved one was their primary goal (compared with 5% of older millionaires).

“Increasingly, millionaires want to ensure their children understand the responsibility that comes with wealth,” said Griffin. “Along with planning for their children’s financial future, young millionaires want to instill strong values, and get them involved in giving early on, so that it becomes an important part of their lives.”

A total of 1,014 online questionnaires were completed among households with self-stated $1 million or more in investable assets in the fourth quarter of 2007.

Data & Research September 3, 2008

UMAs Need More Standardization

New research says rapid growth in unified managed accounts (UMAs) will be stinted if the need for industry standardization and automation isn’t addressed.

Reported by

Ellie Behling

A report issued by Dover Financial Research LLC, a firm in the managed accounts industry, says the evolution of model portfolios might have been in the right direction, but now the industry is facing gross inconsistency.

With model portfolios, an overlay portfolio manager (OPM) takes over trading and administration and the investment manager constructs the portfolio. Model portfolios were designed initially to make it easier for industry participants to customize and balance portfolios, provide tax-management expertise, and facilitate communications between sponsors and investment managers, Dover Financial said. However, the company doesn’t think the system is working as it should, requiring more standardization and automation.

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters. 

“The added complexity of having a third-party involved poses a set of new challenges related to communications and processes, and affects a number of issues: how quickly decisions regarding an investor’s portfolio can be completed; how costs can be contained; and how levels of market, investment and operational risk can be reduced,’ said Jean Sullivan, managing principal of Dover Financial Research, in a press release.

UMA assets under management have grown to $127 billion, and investment managers and sponsor firms are projecting they will likely increase to $355 billion in the next five years, according to Dover. Investment managers and sponsors expect between 30% and 50% of SMA assets—now at $519 billion—will convert to UMA model portfolio programs within five years.

Dover said there is growing concern that fiduciary responsibility, customization trends, and increased utilization of tax management capabilities will drive an increase in communications associated with account openings, maintenance, and reconciliation. But meanwhile, communication is becoming difficult to maintain.

The company proposes that the industry leverage current industry standardization efforts across UMA platforms to facilitate account openings, maintenance and reconciliation, as well as account conversion and set-up from SMA to UMA programs. The company also pushes for a single automated interface that simultaneously uploads models to all relevant programs, as well as standard communications to validate and confirm model changes, execution price and trading instructions.

The full report is available here.